Planning for Business Succession

Estate Planning and Business

A privately held business may be severely impacted by the death of the founder, especially if proper planning has not been done in advance.

In addition to the loss of knowledge and skill of the owner, the successful business may face pressures from the need to pay estate taxes and compensate the beneficiaries of the owner for their interest in the business.

While some pressure has been relieved by temporarily eliminating the federal estate tax (with projected revision in 2011 to a threshold of $3,500,000 for individuals (or $7,000,000 for a couple, with proper planning), there are still state estate taxes to pay in many states.

Difficult issues such as whether to sell the business to an outsider, a family member in the business, or a key employee need to be resolved in advance so that proper planning can be done, allowing for flexibility in the event of changed circumstances.

The first step is for the owner or owners of the business to realistically look at the business and determine its value in the event of the departure or death of an owner.

The owners, in conjunction with legal counsel and accountant, can craft an appropriate set of agreements, providing for various situations including voluntary and involuntary departures from the business, sales to third parties, incapacity of an owner, and death of an owner.

Frequently, life insurance is used to fund some of the scenarios, including death and disability.

An experience life insurance agent can be a valuable part of the planning team.

We can assist you with this planning, as well as integrate existing plans with your personal estate planning.